Syria says preparing to finalize oil deal with Russia

MOSCOW Tue Aug 21, 2012 5:25pm EDT

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MOSCOW (Reuters) - Syria is preparing to complete a deal with ally Russia to secure much-needed oil products to keep its economy and military running, the head of a Syrian delegation to Russia said on Tuesday, weeks after he said an agreement had been reached.

Syrian Deputy Prime Minister for Economic Affairs Qadri Jamil on August 3 told reporters that an agreement had been reached for Syria to export crude to Russia in exchange for refined oil products.

"It was an agreement in principle reached during our last visit," Jamil said at a news conference, adding that sanctions imposed by the United States and the European Union were biting into the Syrian economy.

"We have to find an alternative path. I think in the near future we will complete the preparatory stage and move on to a real agreement on the delivery of oil and oil products," he said after talks with Russian Foreign Minister Sergei Lavrov.

Two separate Syrian delegation have visited Moscow this month in order to bargain for crucial economic aid, including a loan, though Jamil said it was too early to go into the details of any such credit.

Syria is one of Russia's last Middle East footholds and hosts a repair and maintenance facility for the Russian navy on its coast. Russia has adamantly opposed any foreign intervention in the country, though Moscow says it is not tied to Assad.

Russia has remained silent on the issue of an oil-for-oil-products swap deal, which could raise questions on the extent to which it might extend help to Assad's government, whose days analysts and some western countries say are numbered.

Earlier this month, Syria's oil minister said oil production was less than 140,000 barrels per day.

EU governments have agreed to ban imports of Syria's oil as well as prohibit European firms from making new investments in its oil industry.

Syria's traditional suppliers have pulled out, leading to shortages in gasoline, diesel and oil fuels, some of which are used to run Syrian tanks.

The Wall Street Journal earlier this month reported that Syria had plans to use Russian banks as part of a scheme to get around Western sanctions on oil and financial transactions.

Citing government documents and correspondence, the paper reported that correspondence with then Prime Minister Riyad Hijab recommended setting up offshore companies in Russia to receive payment for crude oil.

Syria was receiving shipments of Russian diesel and gasoil regularly last winter, according to traders and shipping sources, though the supply may have dried up earlier this year.

Venezuela also emerged as a supplier of diesel to Syria earlier this year, sending a $50 million cargo of fuel, according to trading sources.

(Reporting By Thomas Grove; editing by Jane Baird)

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